By Michael Hiltzik
Los Angeles Times
With his proposed conditions on the deal, FCC Chairman Julius Genachowski is trying to sugarcoat a terrible regulatory decision that underscores the derelict condition of government regulation in our age.
Federal Communications Commission Chairman Julius Genachowski is poised to greenlight the proposed merger of the big cable company Comcast Corp. with the huge entertainment conglomerate NBC-Universal. Genachowski wants to impose several conditions on the deal to ensure that the resulting entertainment behemoth can't use its dominating power to shut down competition, jack up rates for customers, and generally undermine the public interest.
The likely result of those conditions? Comcast will be as free as it wishes to shut down competition, jack up rates for customers and generally undermine the public interest.
That the FCC chairman is trying to sugarcoat a terrible regulatory decision underscores the derelict condition of government regulation in our age.
Here's the basic truth about this deal, no sugarcoating: Nothing about it enhances the public interest, which is the standard that must be met for the FCC to approve the license transfers that are essential to the deal.
Neither Comcast nor NBC needs this merger for its survival. It won't improve cable TV or Internet technology. It won't by itself lead to more innovative or even more popular television programming. It won't result in more efficient entertainment production.
In fact, by concentrating economic power in fewer hands, it may lead to less of all that. Claims similar to those being made by Comcast and NBC — that the merger will be great for customers — were made for all the media mega-mergers of the last 15 years, involving Walt Disney Co., ABC, Viacom, CBS, Time, Warner Bros., CNN and AOL, among other companies.
These deals didn't create a golden age of filmed or video entertainment, or engender a surge of trenchant news reporting or analysis (quite the contrary), or deliver lower costs for the audience. Cable and Internet technology advanced, but that would have happened anyway.
One irony of the Comcast-NBC deal is that it's barreling through in the name of media deregulation just as we've lost perhaps the smartest deregulator we've ever had: Alfred E. Kahn, who died two days after Christmas, oversaw the deregulation of the airline industry in the late 1970s, a policy that has saved Americans billions of dollars in fares.
Kahn understood that deregulation comes in many flavors, and some of them leave a bad taste in the public's mouth. In 2002, he observed that the airline mergers that followed his deregulation of that industry reflected an "abdication" by government.
Unhappy that the airline industry had already become more concentrated than it had been before deregulation, Kahn wrote, "That is why we have antitrust laws." He blamed the reconcentration of the air carriers on "the failure of the Department of Transportation to disallow even one merger of direct competitors."
The media landscape isn't much different. The last big media merger to be rejected by the FCC was the proposed DirecTV- EchoStar deal in 2002, which would have given the combined company 90% of the satellite TV market.
If Comcast-NBC goes ahead as planned, former FCC Commissioner Tyrone Brown has predicted, it will be the first big deal of many. "Three megacompanies — at most four — will effectively control every aspect of the product chain, from creation to distribution to the customer." (Brown said this in testimony to the FCC as president of the Media Access Project, a Washington nonprofit advocacy group.)
The Comcast-NBC deal will create novel opportunities to undermine competition and diversity in the cable and Internet industries. Comcast's self-interest as the owner of major broadcast and cable channels will give it an incentive to keep new, independent channels off its cable grid. Its leverage as owner of the NBC networks will allow it to shoulder other channels out of prime spots on other cable systems.
Comcast will have an incentive to hamper the growth of non-cable video distribution services, such as the Internet-based instant-viewing option offered by Netflix or the rental service of Amazon.com, whether by denying them NBC programs or interfering with their transmission to Comcast Internet subscribers.
Surprise: Comcast already is jacking up its fee to carry the Netflix video stream "as a tool to impede competition," according to a complaint filed with the FCC by Level 3, the company Netflix hired to deliver its digital bits to customers. Level 3 says it shouldn't pay anything extra to deliver the Netflix service to Comcast's subscribers. Comcast says its dispute with Level 3 is a plain-vanilla disagreement over Internet traffic, not an effort to stifle a rival.
Who will pay if these fees stand? The customer. Netflix will raise its rates to cover its transmission costs, and I bet Comcast will find a way to charge its customers more for the higher Internet speeds and usage limits they need for high-quality Netflix video.
Genachowski's proposed conditions, which have been circulated to the other four FCC commissioners, include barring Comcast from discriminating against services like those of Netflix and Amazon. But enforcing the rules will almost certainly depend on complaints from aggrieved parties such as Level 3.
That's a weak system. Given the complexity of Internet and cable service, establishing that an action is discriminatory is an incredibly time-consuming and costly process. That's why the incumbent almost always gets its way and why "conditions" imposed by regulators seldom present real obstacles to underhanded behavior.
The only effective way to combat this discrimination is to keep it from happening in the first place. The drawbacks of allowing content producers to own their distribution networks were recognized in this country as long ago as the 1940s, when the government forced the Hollywood film studios to sell off their theater chains. Back then, the Supreme Court found that the evidence that the studios had fixed ticket prices and engaged in other anti-competitive behavior was "incontestable."
We've forgotten a lot since the court's 1948 ruling in U.S. v. Paramount 334 U. S. 131 (1948) . Or maybe we've just gotten more gullible when monopolistic corporations claim they need to be bigger to serve us better.
Or maybe the regulators have just given up. As Comcast-NBC goes, so goes the nation. Brace yourselves; your pockets are destined to get picked by fewer, but bigger, media monsters.
Michael Hiltzik's column appears Sundays and Wednesdays in the Los Angeles Times. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.
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